Foreign bankers only want to team up with powerful domestic partners

VietNamNet Bridge – While domestic banks want to buy back weak banks, which are now in big supply, thanks to the ongoing bank restructuring process, foreign banks tend to buy the stakes of powerful domestic banks.

Under the plan to restructure credit institutions in 2011-2015 which has been approved by the Prime Minister, weak banks would be forced to merge and accept acquisition deals, if they do not merge into each other on a voluntary basis. The restructuring promises a more bustling bank M&A market in the near future to both domestic and foreign investors.

Toshifumi Iwaguchi, Director of RECOF, an M&A consultancy firm from Japan, said on Dau tu--that Japanese investors have been very interested in making investments in Vietnam through M&A mode. Banking, together with consumer goods production are the two business fields that Japanese investors pay a special attention to.

The fact that Japanese Mizuho Bank successfully purchased 15 percent of stakes of Vietcombank, one of the biggest banks in Vietnam, in 2011, was a typical example that paves the way for more M&A deals to be carried out.

“I strongly believe that in 2012, more M&A deals in the banking sector would succeed,” he said.

General Director of Sumitomo Hanoi Branch, which purchased 15 percent of Eximbank’s stakes, said that under the current regulations, Sumitomo cannot become the strategic shareholder of any another Vietnamese bank. However, amid the strong wave of bank M&A, the bank is considering acting as the go-between for M&A deals.

Though many domestic bankers have expressed their intention to buy weak banks, if the State Bank of Vietnam turns the green light on the deals, experts believe that they do not expect many M&A cases among domestic banks to take place in the near future.

In fact, Vietnamese banks are not powerful enough to take over other banks, while they have their own problems to deal with. Experts say that there would be more M&A deals, where foreign banks--which have powerful financial capability, corporate governance skills and advantages in technology, buy Vietnamese banks. More importantly, foreign bankers are targeting the Vietnamese market, where they believe they can find a lot of good opportunities.

Therefore, analysts say that there’s no need to worry that Vietnamese banks would not find reasonable foreign shareholders. Sources said that after the failed negotiation with Nova Scotia, Vietinbank is conducting negotiations with other foreign partners. The Bank of Investment and Development of Vietnam (BIDV) is also choosing foreign strategic partners among the 40 investors who have expressed their willing to buy BIDV’s stakes.

Both Vietinbank and BIDV were state owned banks and the biggest banks in Vietnam, which have been equitized.

A European partner is negotiating with Ocean Bank, a joint stock bank, on the purchase of 15-20 percent of stakes of the Vietnamese bank and join its leadership.

However, foreign banks tend to find powerful banks for cooperation rather than weak banks that need support. Director of a Vietnamese consultancy firm has revealed that two foreign banks have asked the firm to help buy stakes of Vietnamese banks. The targeted banks could be not too big, but they need to be healthy with the high transparency and low risks.

“Under the current regulations, a foreign bank can only hold up to 15 percent of the stakes of a Vietnamese bank, therefore, they need to choose powerful and potential domestic banks, and they would not venture to buy stakes of weak banks,” the director of the firm said.

In related news, Dan tri newspaper has reported that the Saigon-Hanoi Bank is collecting shares in an attempt to take over Habubank, and the deal has nearly been completed. Meanwhile, Habubank’s press release has denied the information.